Associate Gets Crushed Beneath White Shoe

Early on the morning of Feb. 13, 28-year-old former Sullivan & Cromwell associate Aaron Charney was not far from the white-shoe conference rooms at the firm’s offices on Broad Street, in the financial district.

But how far he had fallen!

He was consulting with labor lawyers from Alterman & Boop, the scrappy but respected Worth Street firm with the name out of Dickens, where callers get piped Joni Mitchell and Paul Simon while they’re on hold. The mission was twofold: to keep alive a lawsuit he’d filed against the 128-year-old firm charging he’d been the victim of harassment and retaliation from partners because of his sexual orientation; and to prepare his defense against the countersuit the firm had filed against him. But they amounted to the same task: the salvation of his career. By the end of the day, the firm had filed papers with the court that essentially ensure he’ll never get work in Big Law in this town again.

Mr. Charney had been a star on Jan. 16, when he filed his discrimination suit. A certain Manhattan subculture quickly settled down for a juicy exposé of life inside The Firms. There was plenty of Lifetime Original material in his suit—like his claim that partner Eric Krautheimer once tossed a document at Mr. Charney’s feet and said “bend over and pick it up—I’m sure you like that.” He named names, told stories and basically lit up the increasingly influential legal blogosphere.

But very quickly the ground beneath the lawyer, the only child of a Syracuse-area clothing-retail family, shifted precipitously.

He was turned out of the firm, and before long a team of 10 lawyers could be seen at 60 Centre Street, pressing their case for a countersuit against him for stealing company files and disseminating embarrassing material about big-firm clients like Goldman Sachs.

The firm managed to turn the dispute from a referendum on the culture of the firm into a referendum on Mr. Charney’s suitability as an associate.

While the entire affair has only entered the public consciousness in the last four weeks, both parties admit that the trouble with Aaron Charney began as long ago as last spring.

In court documents, Mr. Charney says that he first lodged a complaint of sexual orientation discrimination in May 2006.

He writes that 10 days later, partner David Harms took him aside to tell him that two of the partners about whom he had complained “denied making any discriminatory comments.”

But in an e-mail sent to all firm members, chairman H. Rodgin Cohen asserted a different version of the story.

“Mr. Charney first raised assertions of this sort in May 2006 through a lawyer, and his assertions were followed by a multi-million dollar demand. The Firm promptly investigated his assertions at that time, and rejected Mr. Charney’s money demand.” (According to a source familiar with Sullivan & Cromwell’s side of the litigation, Mr. Charney initially asked for $5 million, and Sullivan & Cromwell offered “a very small fraction” of that. Mr. Charney referred calls to his lawyers, and through its recently retained public-relations firm, Sullivan & Cromwell declined to comment.)

Mr. Charney’s complaint makes no mention of settlement conversations, but describes retaliation against him that endured for the following seven months.

He says he was denied opportunities to mentor summer associates, encouraged to relocate to a foreign office and that partners started claiming that his working relationship with another associate was a romantic one and that it posed a “management problem.”

In his complaint, Mr. Charney claimed, he was told that a Sullivan partner referred to their friendship as “unnatural” and that another partner thought they were too close. (That Sullivan associate, Gera Grinberg, has since been placed on paid leave.)

In an interview with TheObserver the day he filed his complaint, Mr. Charney denied that he had named any price after filing his internal complaint. But if the Sullivan & Cromwell number of $5 million is to be believed—and the firm has an interest in spreading a number as high as possible—then the price tag tripled in the more than seven months that passed between those settlement talks and Mr. Charney’s now famous serving of papers on the Infirmation.com “Greedy Associates” message board.

His summons requested $15 million in damages.

Eight days after Mr. Charney filed his complaint, a related article appeared on page B7 of The Wall Street Journal.

Ostensibly about Sullivan & Cromwell’s attempts to address profound associate dissatisfaction, the story contained a particularly intriguing nugget. In the course of attempting to model a review process on that conducted by firm client Goldman Sachs, a Sullivan & Cromwell partner had disseminated a copy of a confidential review, only partially redacting the subjects’ names and positions. It was easy to identify the four Goldman employees—The Journal wrote—“a fact that individuals close to Goldman and Sullivan describe as embarrassing.” (The firm alleges that Mr. Charney stole and leaked the document to TheJournal.)

More than two weeks after Mr. Charney’s own filing, the press-shy firm responded in its own way: Rather than holding a press conference to denounce Mr. Charney, the firm chose the protected forum of a court filing.

The complaint accused him of stealing that confidential Goldman review from a partner’s office and leaking it to TheJournal and of improperly obtaining his own performance reviews. It paints a picture of an untrustworthy and devious associate. Mr. Charney was fired the day the suit was filed.

“The debate was: ‘Would this help us or hurt us?’” said the source familiar with Sullivan & Cromwell’s legal strategy.“The downside in filing the suit was to prolong the story, to keep it on the front pages …. [But] we concluded that we were obligated to bring the lawsuit irrespective of what it did to us.”

But while Sullivan & Cromwell pains to paint their suit as a separate action prompted by the violation of a professional code of confidentiality, that doesn’t tell the full story.

“They were hurt and angry, it was simply an opportunity to hit back, which is what every client always wants,” commented one prominent New York litigator.

At a hearing at New York State Supreme Court last week, a team of about 10 lawyers represented the firm. Buffed and gleaming, sporting fine wool suits and gold wedding bands, they were the picture of corporate exactitude and deep pockets. When their trial lawyer, Charles Stillman, slipped his coat on, it was hard to miss the huge Bergdorf Goodman label. Employment lawyer Zachary Fasman’s pocket square was folded into four perfect points.

And then entered Mr. Charney’s legal team, a more disheveled crew of four, lead by jolly civil-rights lawyer Daniel L. Alterman.

“What happened to your arm?” he joked to Mr. Stillman, who was sporting a sling because of recent arthroscopic surgery. The crowd was quiet.

“You should see the other guy,” retorted Mr. Stillman.

More than halfway into the hour-long hearing before Judge Bernard Fried, convened to discuss the return of documents to Sullivan & Cromwell, came the revelation that the firm strategists couldn’t have dreamed up. As was quickly reported on legal blogs later that afternoon, including the Law Blog of TheJournal and Above the Law, Mr. Stillman raised a “critical” issue of “the utmost seriousness.” He had learned the day before that Mr. Charney had “destroyed” his hard drive.

Mr. Alterman had struggled to explain his client’s actions; his further claim, that Mr. Charney simply e-mailed himself work in the course of working as an associate at the firm, might be more difficult to prove without Mr. Charney’s hard drive.

The next day, the lead story in The New York Law Journal was headlined: “Destroyed Hard Drive Becomes Focus of Hearing in S&C Suit.”

While the Sullivan & Cromwell team was patting itself on the back, Mr. Charney’s representatives consoled themselves with the fact that the judge hadn’t lost his cool when he was informed of the destruction.

Judge Fried instructed Mr. Charney to return to the court two affidavits by Feb. 14 accounting for what he had done with his hard drive and the documents he has returned to Sullivan & Cromwell.

On Feb. 13, Sullivan called on the judge to dismiss Mr. Charney’s complaint on the grounds that the case will reveal client and firm matters and secrets. In a footnote to the 22-page motion, the lawyers address Mr. Charney’s destruction of his hard drive with a snarl.

“Charney’s attempt to blame S&C for his willful destruction of material information in violation of the New York Penal Code is false, contemptible and will be addressed at the appropriate time,” the note reads.